California Code of Regulations
Title 10 - Investment
Chapter 3 - Commissioner of Financial Protection and Innovation
Subchapter 9 - Escrow Agents
Article 4 - Books, Records and Accounts
Section 1737.1 - Internet Escrow Agent Special Accounts
Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) All money received by an Internet escrow agent from a credit card or Automated Clearing House ("ACH") transfer as part of an escrow transaction shall upon receipt be deposited in a bank, a savings bank, or a savings and loan association in a separate account that is designated "trust" or "escrow" account. No funds other than those received from a credit card or ACH transfer as part of an escrow transaction shall be deposited in such account or otherwise commingled with any other escrow money.
(b) An Internet escrow agent shall not withdraw, pay out or transfer monies from a particular escrow for deposits received by credit card or ACH transfer prior to the deposit of the funds into the trust or escrow bank account.
(c) An Internet escrow agent shall be required to establish a reserve made up of general account funds for the purpose of covering losses that result from the acceptance of credit cards and ACH deposits, including, but not limited to, charge backs, disputed charges, fraudulent transactions and any other debits. The reserve shall at least equal 10% of the average monthly credit card and ACH receipts. If actual losses exceed 10% of the average monthly credit card and ACH receipts, the Internet escrow agent shall immediately increase the reserve to at least equal the percentage of actual losses to the average monthly credit card and ACH receipts. An Internet escrow agent may request approval from the Commissioner to reduce the reserves required under this section. The Commissioner may approve the request to reduce the required reserve if, in the opinion of the Commissioner, the Internet escrow agent submitted sufficient evidence to demonstrate that the lower reserve will be sufficient to cover anticipated losses. The reserve required for credit card and ACH losses is in addition to the tangible net worth and liquid assets required by Section 17210 of the Financial Code.
(d) The Internet escrow agent shall deposit funds from the reserves required in subsection (c) into the escrow trust account to cover any losses that result from credit cards or ACH deposits on or before the close of the next full working day after receiving notification of the debit. This subsection shall not apply if the debit is against funds received from a credit card or ACH deposit that remains in the escrow account.
1. New
section filed 3-3-52; effective thirtieth day thereafter (Register 27, No.
5).
2. Amendment filed 6-27-74; effective thirtieth day thereafter
(Register 74, No. 26).
3. Amendment filed 12-31-79 as an emergency;
effective upon filing. Certificate of Compliance included (Register 80, No.
1).
4. Editorial correction of NOTE filed 4-6-83 (Register 83, No.
15).
5. Redesignation of first paragraph as subsection (a),
renumbering of former subsections (a)-(g) as (a)(1)-(7) and new paragraph (b)
filed 12-16-97; operative 1-15-98 (Register 97, No. 51).
6.
Renumbering of former section
1737.1 to section
1737.3 and new section
1737.1 filed 7-21-2003; operative
7-21-2003 pursuant to Government Code section
11343.4
(Register 2003, No. 30).
Note: Authority cited: Section 17400, Financial Code. Reference: Sections 17409, 17410 and 17411, Financial Code.
